Market Trends – Thu 9 Aug, 2012

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$1620 is getting harder and harder to breach. If it fails at this level a couple of more times we head all the way back down to $1580. Why is this level such tough resistance?

On August 10, 2012 at 7:24 am,Lynnsays:

Hi James.

Looks like we’re getting through it today!

On August 10, 2012 at 7:20 am,cfs2000says:

Don Coxe was interesting today.

Re: bail-outs – A simple explanation……

Spanish debt is 4 times GDP.
Spanish tax income is 20% of GDP.
At what interest rate would interest on the debt consume all taxes?
That’s easy…….
Divide income by debt = 5%
Spanish interest rates for new bond issues are 6%, so borrowing NEW money at 6% just digs a deeper hole.
Spain can by itself only do two things: Raise tax income or cut spending.

Unfortunatelly, history shows that at 20% (or TWICE the rate paid by surfs in the middle ages) the limit on increasing taxes has been reached. I.e. increasing tax rates will not increase tax income because of tax avoidance (legal and illegal) or tax flight.
Thus the only way out is to cut spending and pray that other countries will loan cheap money. (History shows, however, even bail-outs will be defaulted on.)

On August 10, 2012 at 4:57 pm,John W. Robertsonsays:

“Spain can by itself only do two things: Raise tax income or cut spending.”

Of course, the 3rd method is to grow. But with 25% unemployment, that’s not likely. Just adding the 3rd point for completeness. Nice proof CFS.

On August 10, 2012 at 7:29 am,James (the lesser)says:

Lynn – Yes it looks like we are busting through $1620 today (Friday.) Hopefully we close well in the clear of this today and keep the momentum going next week.
If so there are alot of gaps that need to be filled and we could easily take out $1700 quickly!

On August 10, 2012 at 7:33 am,cfs2000says:

Just for the record:
US debt is just about 4 times GDP AND GROWING rapidly.
For the last 100 hundred years Federal tax income has been between 18% and 21.6%, regardless of how high or low the actual tax rates have been.

Our saving grace right now is the Federal Reserve buying treasuries and keeping interest rates low.
So I predict rates will be kept low for a LONG time.

However, this only will work to save the country as long as spending can be cut.

Because our scum politicians are hell-bent on buying votes by increasing spending, I believe there will be NO spending cuts and that a default is inevitable eventually.
I further believe both Bush and Obama have and are destroying the USA as we know it…..heading towards a third world status. (Of course the US leaders will cause a world war to obfuscate their utter incompetence within the next decade!)

On August 10, 2012 at 7:36 am,Shawnsays:

The real mania in the gold market may not start until the US dollar starts to implode and right now it is being viewed favorably by the Europeans as a safe haven rather than a basket case but if this crisis shifts to Japan next we could see the US dollar again get another boost from the Japanese. All in all it will be a waiting game to see whose economy gets hit next. The US could be the last to go and when this happens prices for precious metals will skyrocket. This is the geist of my reading as of late so I will keep my core position and add on. Another point brought out in Casey Research is that when the physical dries up the precious metal stocks will be the only place left to buy and we will then see tremendous upward movement in these markets.

On August 10, 2012 at 7:52 am,roger wiegandsays:

James- the difficulty in the breaching of that price was the 200-day gold moving average at 1622.50. This Friday morning we busted through it as I expected and the last price on the Dec futures friday am 752am PST is 1625 with touched high of 1629.70 – traderrog